Up-to-the-minute advice, information, resources, and, on occasion, commentary on federal and New Jersey state income taxes, and the various New Jersey property tax rebate programs, and insights and observations on tax policy and professional tax practice, by 40-year veteran tax professional Robert D Flach.

Wednesday, January 25, 2012

MITT'S 1040

So now we have
seen Mitt Romney’s tax return.

We already knew
he was rich – now we know just how rich.

What did Mitt
do?Certainly nothing illegal.He invested his money for the best return, as
you or I would do.It is just that he
has a lot more to invest than we do.

Did he
participate in any shady tax dodges or shelters?Not that I can see.He invested in stocks and earned a ton of
dividends, most of which were taxed at a special rate of 15%.And he his investments did well – resulting in
humungous long-term capital gains.Did
he do anything sneaky to get the special 15% rate?No. The Tax Code allows for a 15% tax rate
for “qualified” dividends and long-term capital gains.If you or I invested in the same, or similar,
stocks we, too, would pay 15% on qualified dividends and long-term gains.Actually some of us would pay 0% tax on all
or part of the and capital gain income.

Romney also
gave close to $3 Million to church and charity, about 1/7 of his AGI, which, being
deductible, reduced his taxable income.Would he have given the same $3 Million away if he did not get a tax
deduction? I think probably so, or at
least almost as much.But the Tax Code
allows for a deduction, under both regular tax and the dreaded AMT, for
contributions to church and charity.You
and I would get the same tax deduction.

Because he was
a victim of the dreaded AMT he got no tax benefit for his substantial state and
local income tax and real estate tax payments and his also very high investment
expenses.

He paid $3
Million in income taxes!More than you
or I did.More than anyone I have ever
known did (I believe the most a client of mine has ever paid is a little over $1
Million).Again about 1/7th
of his AGI.Almost half of Americans
either paid absolutely nothing or actually made a profit from filing a tax
return.Should he have paid more tax so
a higher percentage could pay 0?Why?

His return was
indeed voluminous – over 200 pages and attachments.And he filed forms and schedules that I have
never even heard of in 40 years in the business, let alone ever prepared.But they were due to the nature of his
investments.

Here is some
more info on presidential candidate tax returns -

•The TAX HISTORY PROJECT provides links to the
tax returns of Obama and Biden and Romney and Gingrich, as well as those of
former Presidents and candidates.

•The WASHINGTON POST compares the basics of the
tax returns of BO, Newt and Mitt in “Tales of the 1040s”.

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